A borrower seeks Fannie Mae second-home financing for a one-unit house nine miles from her office while retaining her principal residence. The file does not establish her intended use of the new house. How should the lender determine occupancy classification?
Correct Answer
D) Verify intended personal occupancy and the second-home requirements rather than classify it from distance alone
D. Verify actual intended use and the second-home requirements. Personal occupancy for part of the year, year-round suitability and exclusive control are relevant requirements. Nine miles from work and ownership of another residence do not establish those facts. Scope and exceptions: One unit satisfies only one condition. A management agreement controlling occupancy is disqualifying under this provision. Identified rental income does not automatically defeat second-home treatment if it is not used to qualify and all other requirements are met. Source: Second Home Properties and footnote 1 — https://selling-guide.fanniemae.com/sel/b2-1.1-01/occupancy-types
Why This Is the Correct Answer
D. Verify actual intended use and the second-home requirements. Personal occupancy for part of the year, year-round suitability and exclusive control are relevant requirements. Nine miles from work and ownership of another residence do not establish those facts. Scope and exceptions: One unit satisfies only one condition. A management agreement controlling occupancy is disqualifying under this provision. Identified rental income does not automatically defeat second-home treatment if it is not used to qualify and all other requirements are met.
Why the Other Options Are Wrong
Option A: Classify it as a principal residence because it is closer to the office than her current home
A shorter commute alone does not prove primary occupancy.
Option B: Classify it as an investment property because it is less than 50 miles from the office
This provision does not impose the proposed 50-mile office-distance rule.
Option C: Accept second-home status solely because the borrower already has a principal residence
Owning a principal home is not sufficient evidence of second-home use.
Exam Tip
Classify from documented use and program conditions, not a distance shortcut.
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